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City Index ME Implementing Step Margins

City Index ME will be implementing step margins on Saturday 7 July 2018. Most traders will not experience any changes to their current margins, however traders with very large open positions or traders on leverage larger than 200:1 may need to take further actions.

All new positions will be opened using the new step margins. Any existing positions you have will move to the new step margins. This means that any very large positions will require extra margin to maintain. In addition, the new minimum margins are also 0.5%. Any positions requiring less than 0.5% margin will move to this new minimum. We will also be changing our MCO to 50%, which means that you will need 50% of the minimum margin requirement in order to continue trading instead of the current 100% requirement.

The vast majority of clients trading with City Index will not need to take any action, and their trades will continue with the margins they currently see in their account. Clients who will have a change in their margins may need to either fund their account to maintain their trades in order to avoid having their positions closed out due to insufficient margin. We will be in touch with you individually if you are one of the clients at risk of having margins shift on any of their open positions.

What are Step Margins?

Step margins are margins that change according to the size of the position. The larger the trade size, the higher the risk level associated with the trade. Therefore we may increase our margin requirements for larger size trades or any additional trades in that instrument. To do this, City Index increases the size of the margin requirement at specific levels, known as 'step margin levels'. For example, step margins on EUR/USD are:

Quantity

Margin Factor

$0 – €8,700,000 3.33%
€8,700,000 – €17,000,000 5%
€17,000,000 – €26,000,000 10%
€26,000,000 – €65,000,000 15%
€65,000,000 + 20%

If you were to place a trade in EUR/USD of 5,000,000, you would be charged an initial margin of 3.33%. If you were to place an additional trade of 10,000,000 in the same market, your total position in that market would be 15,000,000.

This means that, for your total position in this market, the first 8,700,000 is charged at the initial step margin of 3.33%. The remaining 6,300,000 is charged at the second step margin of 5%.

Each market has different step margin levels and requirements, and you can find more information on the step margins for each market in the Market Information Sheets in the platform.


Why is this happening: ESMA regulations

On 25th May 2018, the European Securities and Markets Authority (ESMA) issued a statement confirming that it will restrict the marketing, distribution and sale of leveraged trading products, including rolling spot Forex and CFD trading to retail clients. You can read more about the changes coming to your account here – this page will be updated as the changes start being implemented.

Only retail clients will be affected by the new measures. Professional Clients can continue to benefit from existing margin rates, however they do not have the same level of regulatory protection that retail clients have.

Unchanged Protections

Waived Protections

We are not obliged to offer the following to Professional Clients but have elected to continue doing so:

  • Client money remains segregated from our funds and will be unaffected in the event of our insolvency
  • Best Execution remains unchanged as we owe all our clients a duty of best execution
  • The detail of Trade Confirmations remain unchanged and are sent by the end of the first business day following the execution of the trade, or earlier
  • Key Information Documents remain available to you

You will waive some FCA protections:

  • Margin and leverage limits remain unchanged despite the changes that ESMA introduce for retail clients
  • Mandatory changes to product features which protect retail clients will not be mandatory for you (eg. negative balance protection and margin close out levels).
  • We will assume you have the relevant knowledge and experience levels to understand the risks in trading leveraged products
  • We may use more sophisticated language when dealing with you as a Professional Client than we do with our retail clients.

Professional clients also:

  • Remain eligible for the Financial Services Compensation Scheme if you are a natural person.
  • Retain the rights to complain to the Financial Ombudsman Service when trading in a personal capacity.

Retail clients who wish to be categorised as a Professional Client must meet at least 2 out of the 3 qualifying criteria:

Trading Volume

An average of 10 significantly sized transactions per quarter over the last 4 quarters

Savings & Income

A financial instrument portfolio, including cash deposits, exceeding EUR 500,000 or currency equivalent

Work Experience

Worked in the financial sector in a professional position, requiring knowledge of the transactions or services envisaged, for 1+ year(s)


Request to be categorised as a Professional Client.

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